Altman Z-Score Analysis: Samsung Electronics vs. Apple Inc.

Author

Maria Yu Garcia Munoz

Published

June 1, 2025

Introduction

Background and Objective

Predicting corporate bankruptcy has been a significant concern for creditors, investors, and financial analysts ever since the beginning of contemporary financial markets.Edward I. Altman revolutionized financial analysis in 1968 with the Z-score model, a tool that predicts a company’s likelihood of going bankrupt within two years using five important financial ratios. It became one of the most widely used models for forecasting financial distress in both academic research and practical financial analysis and was first developed for publicly traded manufacturing companies. The significance of Altman’s model lies in its capacity to integrate various aspects of financial well-being, such as liquidity, profitability, leverage, solvency and activity, into a single, unambiguous score. Businesses with Z-scores greater than 3.0 are thought to be financially secure and unlikely to go bankrupt.

Research Purpose and Scope

This report applies Altman’s Z-score methodology to analyze and compare the financial health of two global technology giants over a three-year period (2021-2024). The primary objectives of this analysis are:

1. International Comparative Analysis: Evaluate the financial stability of leading technology companies from different global markets (Korean and American)

2. Cross-Market Application: Assess how the Z-score model performs when applied to companies operating under different accounting standards and market conditions

3. Industry Leadership Analysis: Examine the financial health of two companies that dominate the global consumer electronics and technology hardware markets

Methodology Overview

This analysis employs Altman’s original Z-score formula:

The breakdown of the components is the following:

1. Working Capital / Total Assets

  • Measures liquidity (short-term financial health).

  • Higher values indicate better ability to cover short-term obligations.

2. Retained Earnings / Total Assets

  • Measures profitability and reinvestment.

  • Companies with higher retained earnings relative to assets are more stable.

3. EBIT / Total Assets

  • Measures operating efficiency (Earnings Before Interest and Taxes).

  • Reflects how well assets generate profits before financing costs.

4. Sales / Total Assets

  • Measures asset turnover (revenue generation per unit of assets).

  • Higher values suggest efficient use of assets.

5. Market Value of Equity / Total Liabilities

  • Measures solvency (ability to cover long-term debts).

  • Higher values indicate stronger market confidence and lower leverage.

Company Selection

For this comparative study, I have selected two global technology leaders of consumer electronics and technology innovation.

First of all, both companies are global leaders in the technology industry, so it’s interesting to see how they perform financially using the Z-score model. Since they directly compete in areas like smartphones, tablets, and semiconductors, it’s a good opportunity to compare how different business strategies impact financial stability.

Their business models are also quite different. Samsung is a large, diversified company with a strong focus on manufacturing and big investments in various tech areas. On the other hand, Apple focuses more on creating a connected ecosystem, offering premium and multiple products and services.

Another reason for choosing these two is that they operate in different countries and follow different accounting standards (K-GAAP/K-IFRS for Samsung and US-GAAP for Apple). This international angle helps to see how these differences might affect the Z-score results.

Also, both companies are very transparent and publish detailed financial reports in English, which is really important for making sure the Z-score calculations are accurate.

Finally, since both Apple and Samsung are extremely important to the global tech industry and financial markets, their financial health can tell us a lot about the overall economic trends and risks in the sector.

Samsung Electronics Co., Ltd. (005930.KS)

  • Market: KOSPI (Korea Composite Stock Price Index)
  • Headquarters: Seoul, South Korea
  • Primary Business: Semiconductors, mobile devices, consumer electronic and display technologies
  • Market Position: World’s largest memory chip manufacturer and leading smartphone producer
  • Financial Data Source: Samsung Electronics Investor Relations
  • Analysis Period: Fiscal years 2022, 2023, and 2024

Apple Inc. (AAPL)

  • Market: NASDAQ (National Association of Securities Dealers
  • Automated Quotations)
  • Headquarters: Cupertino, California, United States
  • Primary Business: Consumer electronics, software, and digital services (iPhone, Mac, iPad, services)
  • Market Position: World’s most valuable company by market capitalization and leading premium device manufacturer
  • Financial Data Source: Apple Investor Relations
  • Analysis Period: Fiscal years 2022, 2023 and 2024

Financial Data Extraction

Samsung Electronics Balance Sheet Highlights (KRW in millions)

samsung <- data.frame(
  Year = c(2022, 2023, 2024),
  WorkingCapital = c((171428206 - 61475176), (147516710 - 57007658), (156465142 - 64309842)),
  TotalAssets = c(439326959, 454091777, 354556739),
  RetainedEarnings = c(351867096, 343242483, 350847854),
  EBIT = c(11080704, 481977, 4552108),
  Sales = c(61033127, 47992613, 19556031), 
  MVE = c(281695800, 261930400, 302682200), 
  TotalLiabilities = c(73504271, 69436700, 77411831)
)

kable(samsung, caption = "Samsung Electronics Key Financial Data") %>%
  kable_styling(bootstrap_options = "striped", full_width = FALSE,
                font_size = 11)
Samsung Electronics Key Financial Data
Year WorkingCapital TotalAssets RetainedEarnings EBIT Sales MVE TotalLiabilities
2022 109953030 439326959 351867096 11080704 61033127 281695800 73504271
2023 90509052 454091777 343242483 481977 47992613 261930400 69436700
2024 92155300 354556739 350847854 4552108 19556031 302682200 77411831
apple <- data.frame(
  Year = c(2022, 2023, 2024),
  WorkingCapital = c((135405 - 153982), (143566 - 145308), (152978 - 176392)),
  TotalAssets = c(352755, 352583, 364980),
  RetainedEarnings = c(-3068, -214, -19154),
  EBIT = c(119437, 114301, 123126),
  Sales = c(394328, 383285, 391035),
  MVE = c(2197800, 2389200, 1961000),
  TotalLiabilities = c(302083, 290437, 308030)
)

kable(apple, caption = "Apple Inc. Key Financial Data") %>%
  kable_styling(bootstrap_options = "striped", full_width = FALSE,
                font_size = 11)
Apple Inc. Key Financial Data
Year WorkingCapital TotalAssets RetainedEarnings EBIT Sales MVE TotalLiabilities
2022 -18577 352755 -3068 119437 394328 2197800 302083
2023 -1742 352583 -214 114301 383285 2389200 290437
2024 -23414 364980 -19154 123126 391035 1961000 308030

Altman Z-Score Calculation

calculate_zscore <- function(df) {
  df %>%
    mutate(
      WC_TA = WorkingCapital / TotalAssets,
      RE_TA = RetainedEarnings / TotalAssets,
      EBIT_TA = EBIT / TotalAssets,
      Sales_TA = Sales / TotalAssets,
      MVE_TL = MVE / TotalLiabilities,
      Z = 1.2*WC_TA + 1.4*RE_TA + 3.3*EBIT_TA + 0.99*Sales_TA + 0.6*MVE_TL,
      Risk = case_when(
        Z > 3.0 ~ "Safe (Low Risk)",
        Z > 1.81 ~ "Grey Zone",
        TRUE ~ "High Risk"
      )
    )
}

Samsung Electronics Z-Scores

samsung_z <- calculate_zscore(samsung)
kable(samsung_z, caption = "Samsung Electronics Z-Score Analysis") %>%
  kable_styling(bootstrap_options = "striped", full_width = FALSE,
                font_size = 11)
Samsung Electronics Z-Score Analysis
Year WorkingCapital TotalAssets RetainedEarnings EBIT Sales MVE TotalLiabilities WC_TA RE_TA EBIT_TA Sales_TA MVE_TL Z Risk
2022 109953030 439326959 351867096 11080704 61033127 281695800 73504271 0.2502761 0.8009231 0.0252220 0.1389242 3.832373 3.941815 Safe (Low Risk)
2023 90509052 454091777 343242483 481977 47992613 261930400 69436700 0.1993189 0.7558879 0.0010614 0.1056892 3.772218 3.668892 Safe (Low Risk)
2024 92155300 354556739 350847854 4552108 19556031 302682200 77411831 0.2599169 0.9895394 0.0128389 0.0551563 3.910025 4.140244 Safe (Low Risk)

Apple Inc. Z-Scores

apple_z <- calculate_zscore(apple)
kable(apple_z, caption = "Apple Inc. Z-Score Analysis") %>%
  kable_styling(bootstrap_options = "striped", full_width = FALSE,
                font_size = 11)
Apple Inc. Z-Score Analysis
Year WorkingCapital TotalAssets RetainedEarnings EBIT Sales MVE TotalLiabilities WC_TA RE_TA EBIT_TA Sales_TA MVE_TL Z Risk
2022 -18577 352755 -3068 119437 394328 2197800 302083 -0.0526626 -0.0086973 0.3385834 1.117852 7.275484 6.513918 Safe (Low Risk)
2023 -1742 352583 -214 114301 383285 2389200 290437 -0.0049407 -0.0006069 0.3241818 1.087077 8.226225 7.074963 Safe (Low Risk)
2024 -23414 364980 -19154 123126 391035 1961000 308030 -0.0641515 -0.0524796 0.3373500 1.071387 6.366263 5.843233 Safe (Low Risk)

Visualization of Results

Z-Score Trend Comparison

combined <- bind_rows(
  samsung_z %>% mutate(Company = "Samsung"),
  apple_z %>% mutate(Company = "Apple")
)

ggplot(combined, aes(x = Year, y = Z, color = Company, group = Company)) +
  geom_line(linewidth = 1.2) +
  geom_point(size = 3) +
  geom_hline(yintercept = 3.0, linetype = "dashed", color = "#27ae60", linewidth = 0.8) +
  geom_hline(yintercept = 1.81, linetype = "dashed", color = "#e74c3c", linewidth = 0.8) +
  scale_color_manual(values = c("Samsung" = "#3498db", "Apple" = "#2c3e50")) +
  labs(
    title = "Z-Score Trend Analysis (2022-2024)",
    y = "Z-Score Value",
    x = "Fiscal Year",
    color = "Company"
  ) +
  theme_economist(base_size = 11) +
  theme(
    panel.grid.major = element_line(color = "#f0f0f0"),
    panel.grid.minor = element_blank(),
    plot.title = element_text(face = "bold", hjust = 0.5),
    axis.title = element_text(face = "bold"),
    legend.position = "bottom",
    panel.background = element_rect(fill = "white", color = NA),
    plot.background = element_rect(fill = "white", color = NA),
    text = element_text(family = "sans")
  ) +
  annotate("text", x = 2022, y = 3.2, 
           label = "Safe Zone (Z > 3.0)", color = "#27ae60", size = 3.5) +
  annotate("text", x = 2022, y = 1.6, 
           label = "Distress Zone (Z < 1.81)", color = "#e74c3c", size = 3.5)

Analysis & Interpretation

Key Findings

  1. Samsung Electronics:
  • Z-scores range from 3.67 to 4.14, still indicating a safe financial position.

  • Shows solid performance in retained earnings and working capital, consistent with its status as a large, diversified manufacturing company.

  • Slightly lower market value and profit margins than Apple reduce its overall Z-score, despite strong fundamentals.

  1. Apple Inc.:
  • Highest Z-scores overall, ranging from 5.84 to 7.07, indicating excellent financial health and very low risk of bankruptcy.

  • Despite negative working capital, Apple maintains strong profitability and efficiency, showing how its business model focuses on cash flow and operational discipline.

  • The market value of equity component (MVE/TL) is especially high, which boosts its Z-score significantly — a reflection of strong investor confidence.

Comparative Risk Assessment

risk_comparison <- combined %>%
  select(Year, Company, Z, Risk) %>%
  pivot_wider(names_from = Year, values_from = c(Z, Risk))

kable(risk_comparison, caption = "Comparative Bankruptcy Risk") %>%
  kable_styling(bootstrap_options = "striped", full_width = FALSE,
                font_size = 11)
Comparative Bankruptcy Risk
Company Z_2022 Z_2023 Z_2024 Risk_2022 Risk_2023 Risk_2024
Samsung 3.941815 3.668892 4.140244 Safe (Low Risk) Safe (Low Risk) Safe (Low Risk)
Apple 6.513918 7.074963 5.843233 Safe (Low Risk) Safe (Low Risk) Safe (Low Risk)

The three-year Z-score analysis (2022-2024) reveals both Samsung Electronics and Apple Inc. consistently maintain scores well above the 3.0 threshold, indicating strong financial health and low bankruptcy risk throughout the analysis period.

However, Apple demonstrates significantly higher Z-scores than Samsung across all three years, with scores averaging 65% higher. This suggests Apple maintains a superior financial position from a bankruptcy prediction perspective, though both companies exhibit exceptionally strong financial health.

This analysis also shows how the companies’ different business models influence their Z-score results:

  • Asset usage: Samsung’s manufacturing-focused model leads to lower asset turnover but gives it a stronger working capital position.

  • Capital structure: Apple’s use of financial strategies like stock buybacks and debt management creates a unique and good score pattern.

  • Market perception: Apple’s high stock market valuation significantly boosts its Z-score, especially the part based on market value of equity.

Conclusion

This Z-score analysis confirms that both Samsung Electronics and Apple Inc. maintain exceptionally strong financial positions with minimal bankruptcy risk. While Apple demonstrates superior scores driven by market valuation and operational efficiency, Samsung’s consistent performance reflects the financial strength of a well-managed diversified technology manufacturer.

This also proves that Altman’s Z-score model is still a useful tool for analyzing large tech companies, though it’s important to understand how modern business models and financial strategies can influence the results.

By applying the Z-score across two companies from different global markets (the U.S. and South Korea), this study demonstrates that the model can be meaningfully used in international comparative analysis, while also underlining the importance of understanding each company’s strategic and financial context when interpreting results.

References

Apple Investor Relations:

Apple Inc. (2025) Investor Relations. Available at: https://investor.apple.com/investor-relations/default.aspx (Accessed: 13 June 2025).

Samsung Financial Statements:

Samsung Electronics (2025) Audited Financial Statements. Available at: https://www.samsung.com/global/ir/financial-information/audited-financial-statements/ (Accessed: 13 June 2025).

Yahoo Finance – Samsung Electronics Co., Ltd.:

Yahoo Finance (2025) Samsung Electronics Co., Ltd. (005935.KS) Key Statistics. Available at: https://finance.yahoo.com/quote/005935.KS/key-statistics/ (Accessed: 13 June 2025).

Yahoo Finance – Apple Inc.:

Yahoo Finance (2025) Apple Inc. (AAPL) Key Statistics. Available at: https://finance.yahoo.com/quote/AAPL/key-statistics/ (Accessed: 13 June 2025).